Gamma Company produces cars. Two of the profit centers, Tires center and Assembly center, were in...
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Gamma Company produces cars. Two of the profit centers, Tires center and Assembly center, were in conflict over the price of tires. External suppliers of tires offered Rania, the manager of the Assembly center, the same type and quality of tire for $200. Rania used to buy these tires internally for $300 each. Jamil the CEO of the company called for a meeting with the managers of both centers in order to solve the issue. Kamil the manager of the Tires Centre explained that: "The tires we produce have been a trusted brand for over 60 years and are distributed by Gamma Company to members all over the globe. Our tires have long been recognized as a leading private brand since 1954." Tires Center: Cost per tire $ Direct materials 95 Direct labor 54 Variable overheads 25 3. The Tires Centre had a capacity of 40,000 tires per year, and the Assembly Centre use around 90,000 tires per year. The Tires center could sell all of its production externally for $300. Based on these special circumstances provide a recommendation for Gamma Company whether these two centers should buy/sell internally or externally. Justify your answer. (50 words) Gamma Company produces cars. Two of the profit centers, Tires center and Assembly center, were in conflict over the price of tires. External suppliers of tires offered Rania, the manager of the Assembly center, the same type and quality of tire for $200. Rania used to buy these tires internally for $300 each. Jamil the CEO of the company called for a meeting with the managers of both centers in order to solve the issue. Kamil the manager of the Tires Centre explained that: "The tires we produce have been a trusted brand for over 60 years and are distributed by Gamma Company to members all over the globe. Our tires have long been recognized as a leading private brand since 1954." Tires Center: Cost per tire $ Direct materials 95 Direct labor 54 Variable overheads 25 3. The Tires Centre had a capacity of 40,000 tires per year, and the Assembly Centre use around 90,000 tires per year. The Tires center could sell all of its production externally for $300. Based on these special circumstances provide a recommendation for Gamma Company whether these two centers should buy/sell internally or externally. Justify your answer. (50 words)
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a When there is no spare capacity the golden rule for minimum transfer price is as follows variable ... View the full answer
Related Book For
Accounting for Decision Making and Control
ISBN: 978-0078025747
8th edition
Authors: Jerold Zimmerman
Posted Date:
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